Boardroom upheaval at Shetland oil firm after shareholder revolt

EMBATTLED Shetland oil pioneer Hurricane Energy has parted company with its chairman and four directors after facing a boardroom coup attempt led by a dissident investor.

The company said yesterday that Steve McTiernan had resigned as chairman along with all four non-executive directors with immediate effect.

The resignations came after Hurricane proposed to complete a restructuring that would leave bondholders in control of the firm, and which has been denounced by shareholders.

Crystal Amber Fund called an extraordinary general meeting at which it wanted shareholders to vote Mr McTiernan and the four non-executives off the board and two replacements appointed.

Hurricane announced that the two nominees, Alan Wright and David Craik, have been appointed to the board as non-executive directors.

Crystal Amber Fund has withdrawn its general meeting requisition.

READ MORE: Shetland oil firm faces uncertainty after High Court ruling

However, the changes may not be enough to mollify dissidents.

The boardroom shake-up continues an extraordinary sequence of events at Surrey-based Hurricane, which suffered the indignity of having its proposed restructuring plan snubbed by the High Court last week.

Directors of the company had said the plan was the only realistic option open to Hurricane, which became a star in the exploration business after making promising finds in a layer of rock that others had over-looked.

The company’s valuation rocketed to more than £1 billion after it started production from the flagship Lancaster field. However, the valuation plunged after the company hit problems on Lancaster and went on to slash estimates of the size of the field and other finds.

Shares in the firm closed up around 30 per cent, 0.8p, at 3.6p yesterday. They sold for 60p in 2019.

The board proposed the restructuring, which would involve a debt for equity swap, to address the challenge posed by the fact that Hurricane is due to redeem $230m (£165m) bonds next year.

READ MORE: Hopes for West of Shetland boom fade with oil price fall

The company’s revenues fell amid the fallout from the coronavirus crisis and a drop in production at Lancaster.

However, the plan has provoked outrage among shareholders. It would leave bondholders with 95% of the shares.

Dissidents have insisted the plan is both unfair to shareholders and premature as the bonds are not due for repayment for months. They were furious that Hurricane proposed to complete the restructuring without allowing shareholders a vote.

Hurricane then suffered double embarrassment after the High Court required the company to give shareholders a vote on the plan then declined to approve it.

Following a hearing last week Mr Justice Zacaroli noted: “The Plan would remove, immediately and irrevocably, all but a fraction of the current shareholders’ equity in the Company.”

Referring to the ad hoc committee (AHC) of bondholders with which Hurricane has been negotiating, he added: “The AHC’s desire to obtain control of the Company is not a good reason to deprive the shareholders, now, of all but a fraction of their equity in the Company rather than waiting to see if actual performance over the coming months improves the outlook for the shareholders.”

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He also observed that Hurricane is profitable and “anticipated to remain profitable for at least the next year”.

The outlook is very uncertain.

Following the High Court judgement on the plan the company said on Monday: “The existing Hurricane board is considering all options, including an appeal.”

It noted then that if the restructuring plan is not implemented bondholders have rights which, if enforced, could result in the company being wound up through an insolvent liquidation.

The new non-executive directors may hope to require the company to try a different approach. A stalemate could ensue if Hurricane’s chief executive Antony Maris and chief financial officer Richard Chaffe want to maintain the current course.

Both had their places on the board confirmed yesterday following votes in their favour at the company’s annual general meeting.

READ MORE: US oil giant sells big North Sea portfolio amid upheaval in area

Mr Maris said yesterday he looked forward to working with Mr Wight and Mr Craik as the company aims to maximise the value of its West of Shetland assets for the benefit of stakeholders.

He thanked Mr McTiernan and the departing non-executives for their contribution to the board “ particularly during the recent challenging period”.

Analyst Daniel Slater at Arden Partners noted earlier this week: “It remains a very moot point as to whether a better deal for shareholders than the current proposed restructuring could actually be achieved in practice.”

Some 92 per cent of votes cast by shareholders at the meeting the court required Hurricane to hold opposed the plan, which won overwhelming backing from bondholders.

Hurricane was founded by geologist Robert Trice to focus on a layer of granite known as the fractured basement rather than the sandstone other North Sea firms targeted.

Mr Trice resigned as chief executive in June last year.

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992